Finance Metric of the Month Jan. 2010: Number of Secondary Finance Applications per Billion of Revenue

At most companies, business units are given leeway to choose the secondary applications that best support their business needs, but this freedom comes at a cost. As use of technology increases, transactional process cost falls, but technology costs rise. However, for companies that are world-class in finance, the reduction in staffing made possible through automation more than offsets the cost of automating the processes.

Transactional Excellence Leads to Outperformance, According to New Hackett Finance Book of Numbers

Hackett defines "outperformance" as the finance organization’s ability to perform at world-class levels and strengthen the broader enterprise’s performance, earnings and cash flow results. Doing so in today’s economic environment requires that finance organizations develop three kinds of capabilities: those that help it transact, protect and drive performance. As external and internal conditions change over time, different capabilities within these categories may be required. This means that finance must continuously look for and develop the capabilities that will help it meet emerging challenges. Outperformance in transacting capabilities, which encompass core finance activities including revenue cycle, cash disbursements, and general accounting and external reporting, delivers lower finance costs and helps the organization maintain positive working relationships with stakeholders.

Dealing with the "New Normal" in Finance Operations

The recession has renewed the pressure on companies to make sustainable cuts to SG&A costs. This attention to permanent changes in cost structure constitutes the "new normal." Specifically, Hackett’s Global 1000 clients indicate that even after the economic recovery begins to take hold, they will continue to seek back-office cost reductions in ways that do not require major capital outlays. Further, they are taking action now, neither waiting for the recovery to occur nor sizing cost-reduction targets to the expected extent of the recovery. And finally, they are tasking their back-office functions such as finance and accounting (F&A) with delivering improved levels of quality and service with much lower cost structures.

Finance Metric of the Month July 2009: Length of Time to Close the Gap to World-Class Performance in Finance

The journey to world-class performance can be a lengthy one. Just how long depends on the specific strategies and practices the finance organization develops and the effectiveness of its Service Delivery Strategy. The wide variation in the potential time to reach world-class underscores the need for a careful, methodical, sustained series of initiatives.

G&A Organizations Have Failed the Agility Test

Unprecedented declines in consumer demand, heightened business uncertainty and intense global competitive pressure are testing the agility of G&A organizations as never before.New Hackett research reveals that G&A organizations by and large have failed to demonstrate the appropriate agility to respond to the rapidly declining revenue trends and avoid being a drag on profits. Between Q1 2008 and Q1 2009, Global 1000 companies saw their revenues decline by 13.3%, while their SG&A costs declined by only 1.9%. Since one proven approach to increasing agility is optimization of their global G&A service delivery, executives should take action immediately to define and develop an appropriate Service Delivery Model for G&A.

Finance Metric of the Month May 2009: 2009 Shared Services Usage Levels

As companies increase their adoption levels of shared services, finance functional leaders are able to spend more time developing strategy and supporting the business, and less time managing day-to-day processes.

Outsourcing Provider Uses Lean to Deliver Benefits to Clients Beyond Labor Arbitrage

<p>To meet client expectations of continuous improvement throughout the life of a contract, Steria's Finance and Accounting BPOdecided to use a Lean approach to spur improvement in its operations and client processes and to train its employees in generating new ideas for improvement. After less than a year, the ideas and improvements resulting from the approach have produced a four-fold return on the relatively minimal investment the company made. The effort provides insights of value to companies with in-house shared services orga-nizations and those negotiating with outsourcing partners. These include:</p> <ul> <li>How to prepare for a Lean approach</li> <li>What methods can supplement Lean </li> <li>The contents of a continuous im! provement toolkit </li> <li>How to sustain and operationalize improvements made with Lean</li> </ul>

Eli Lilly Transfers Rules-Based Finance Transactional Processes Directly to BPO

Pharmaceutical giant Eli Lilly and Company recently outsourced what it calls the "rules-based" portions of its finance transaction processes to Hewlett-Packard/EDS. Rules-based processes can be completed by employees using little individual judgment, following a step-by-step procedure. From two locations in India and Poland, the outsourcer now handles these processes in purchase-to-pay, order-to-cash, general accounting and intercompany for 16 Lilly locations on a single-instance SAP system. With little experience in outsourcing or shared services, Lilly’s finance organization faced challenges in formalizing and documenting rules for procedures, standardizing technology and processes, and communicating across fragmented locations and responsibilities. But strong corporate support and thoughtful change management helped the team complete the project on time and under budget. The company estimates it will save 40% overall on outsourced processes beginning in 2009.

Finance Metric of the Month February 2009: Percent of Cash Transactions with Daily Cash Positioning and Funds Mobilization Automated

Treasury organizations must have real-time visibility into their global cash position to accurately forecast cash requirements, ensure liquidity and optimize the use of cash. Automated daily cash positioning improves efficiency by reducing the effort and the number of FTEs required to obtain this information; it also boosts treasury's effectiveness by improving its ability to manage liquidity and perform business analysis.

Finance Metric of the Month January 2009: Projected Increase in Number of Transactional Finance Positions to Be Globalized in Next Two Years

New Hackett research shows that over the next two years, finance organizations plan to basically double the globalization of their transactional processes. The planned expansion of this strategy, which helps reduce costs while maintaining functional effectiveness, represents a significant acceleration of past growth rates.

Hackett Sourcing Location Guide: Romania

Among the central and eastern European countries, Romania is the top destination for the services industry, scoring high on labor costs, productivity and skills. It has a skilled labor pool, especially in IT and IT services, but rising infrastructure and labor costs may make Romania less attractive in the future. Negatives include poorer-than-average telecom infrastructure, transport and logistics infrastructure and social climate.

Hackett Sourcing Location Guide: Estonia

Estonia is proving popular with companies (including outsourcers) from the Nordic region, Russia, Poland and Germany in search of a nearby, stable source of low-cost labor for their service centers. It has a small but well-educated labor force, yet compared with other EU countries, labor costs are still low. The services industry constitutes nearly 67% of the country's GDP. A stable political and economic environment, good IT infrastructure and cultural affinity with the Western European markets have greatly contributed to the success of Estonia's services industry, including captive facilities and third-party vendors. In 2007, Estonia became more prominent as an attractive services destination after debuting at number 15 on A.T. Kearney's list of the top 50 global outsourcing locations. In that report, Estonia was compared to what Ireland used to be 10 to 15 years ago: a relatively low-cost European location with largely untapped talent and a pro-business policy environment.

WNS: Making a Groundbreaking Transition from Shared Services Organization to BPO Provider

Many companies consider turning their in-house shared service organizations into commercial entities, but real-life examples are rare. WNS is an uncommon instance of success in making that transition. The company began life as an offshore transaction-processing unit of British Airways. In 2002, aided by an investment from venture capital fund Warburg Pincus, it was successfully commercialized and since that time has increased its revenues dramatically, providing business process outsourcing services to a variety of industries. But conditions today are quite different from those in 2002, and any spin-off must possess a competitive edge, e.g., scale to compete with existing market leaders, or deep/unique knowledge of a particular industry sector or business process. Companies interested in making their SSO independent can learn valuable lessons from WNS’s experience, including the need to install business-minded management and culture, backed up by solid service delivery and a commitment to process improvement.

Leading CFOs Cite Agility as Important in Weathering Market Turbulence

CFOs are reporting a sharpened focus on improving their own agility in order to respond more swiftly to current market conditions, particularly by delivering superior analytics through FP&A, maintaining early warning systems, and optimizing the service delivery model. In addition to improving agility, finance organizations can use this disruptive time to bring home up to $138 million by closing the gap to world-class performance. Savings could be realized by beginning or accelerating transformation efforts while maintaining effectiveness levels and focusing on higher value-added activities.

Top-Performing Credit and Collections Organizations Are Recession-Ready

Few organizations can say with confidence that all their back-office G&A support functions are always operating at optimum levels of efficiency and effectiveness. For many, sub-optimized functions, especially those within the customer-to-cash process, can exist for long stretches of time without much notice by senior leadership. This lack of attention generally occurs during positive economic periods when executives are focused on increasing sales, market share, product and geographic expansion, and other opportunities. It is usually not until an economic downturn, or recession, that leaders re-focus on such mission-critical processes as credit/risk management and collections. Unfortunately, they often discover that the bad habits their organizations have developed in credit scoring, risk management and collections strategy will take time to correct resulting in delayed customer payments, greater reserves for doubtful accounts, and greater levels of bad debt write-offs. Top-performing organizations in The Hackett Group'™s recently completed Credit and Collections Performance Study avoid this trap by establishing a number of best practices in organizational processes; risk management and collections strategy.

Centralizing Account Reconciliations to Reduce Costs and Improve Performance

At many finance organizations, the centralization of account reconciliations has served as an enabling element of broader transformation efforts, such as the implementation or expansion of shared services operations. This is especially true for finance organizations seeking to achieve world-class performance levels. Companies that seek to centralize their account reconciliations face several important issues, including: • Centralizing all reconciliations or leaving some with local business units • Defining the right accountability model • Fostering standardization of methodologies and processes • Ensuring compliance with policies and procedures These were the topics addressed in a recent interactive webcast held for members of The Hackett Group’s Account-to-Report Process Advisory Program. Finance executives from Network Rail, COLT Telecom Group and Amcor Sunclipse presented, addressing these critical issues and sharing both successes and lessons learned from their organizations’ centralization programs.

Outsourcing the Collections Process Generates More than $650K Improvement for Billion-Dollar Manufacturer

Many finance organizations decentralize their processes by moving them into shared services centers (SSC), either on- or offshore, while others outsource them to third-party vendors. Today, a growing number of firms are automating activities traditionally executed in local offices or field locations. For example, within the revenue cycle, the cash application process has been relatively simple for companies to automate or outsource. Collections, however, because of the sensitive and specialized nature of much of the activity, has largely been kept in-house until recently, as BPOs with an expertise in managing and enhancing customer relationships in collections have made the option to outsource more attractive. Adhesive and sealant manufacturer H.B. Fuller considered proposals from BPOs in the US and India before selecting an onshore provider, The Credit Department in West St. Paul, Minn., to handle its US-only collections function. Because H.B. Fuller was concerned about customer interaction, outsourcing with an onshore partner was more attractive than the potential savings of a low-cost country. Also, working with this outsourcer enabled it to transition the US collections process gradually. The final result, which took one year to accomplish, was a 1% improvement in percent current, translating to a $650,000 reduction in US-based A/R, and improved relationships with customers.

How Utilizing Data and Dashboards to Drive Organizational Alignment Succeeded at Unisys

Technology services and solutions provider Unisys has created an executive dashboard that enables the viewing of key performance metrics from levels that reach from corporate to regional, business unit, functional, account category and strategic program dimensions. In addition, metrics can be sliced and diced to provide cross-organization comparisons. The company’s success was predicated on the following innovations: – Deployment of a “time-boxed” approach, whereby iterations ended on specifieddates, regardless of whether all tasks had been fully completed. As a result, unnecessary delays were avoided as unresolved issues were moved into thenext iterative round. – Facilitation through the Unisys Blueprint Methodology, a process that systematically connects the business architecture (business strategy and business process models) with the services-based technical architecture (application and infrastructure models). – Use of a robust data strategy and data governance model, a practice that means access to the dashboard could be tightly controlled.

Navigating the Bankruptcy Matrix

Top-performing credit and collections organizations establish tight links between credit policies and collection strategies to ensure open receivable balances are aligned with the organization’s risk tolerance. Still, even with those organizations, a bankruptcy filing leaves open receivable balances that many organizations consider 100% uncollectible. However, by monitoring customer activity and financial soundness, and acting promptly if a bankruptcy does occur, creditor companies have a greater chance of minimizing their losses than many might realize. In some cases, they can even help secure a better outcome to the entire bankruptcy proceeding. For example, by getting a representative on the creditors’ committee during a customer’s bankruptcy, one creditor was able to help prevent the debtor from being liquidated. C2C process owners can also create their own working groups to identify risks among customers, track claims through available websites, and file requests for notification of relevant information on filed pleadings.

Beyond Labor Arbitrage: Shared Services Adds Value

<p>One of the earliest pioneers of shared services, HP began migrating F&A activities into a shared services environment over 15 years ago, when the concept was in its earliest stages. Since that time, HP’s BPO shared services culture and supporting systems have matured, as has the company’s methodology for improving the efficiency of transactional processes. In this FSS Perspective, John Schlueter, Director, Record-to-Report Service Line, HP BPO, describes the company’s approach for moving finance processes into and beyond cost savings when establishing a captive shared services center or partnering with a third-party vendor:</p> <ul> <li>Transactionalize problems </li> <li>Fit a best-for-you, best-in-class practice into your plan </li> <li>Compare lift and fix vs. fix and lift </li> <li>Use a transition approach model to determine partnership choices </li> <li>Use a destination model for outsourcing to determine whether and how to outsource</li> </ul>

DIY: How to Create a Localized Continuous Improvement Program

Continuous improvement/quality programs are considered the most valuable tool for optimizing performance in shared services centers, followed closely by a single ERP and end-to-end process design. While continuous improvement is ingrained in the culture in many world-class organizations, for others, establishing improvement programs and initiatives face resistance. This FSS Process Perspective outlines how shared services managers can create their own flexible, low-cost quality improvement program by dedicating appropriate space and time for teams to meet; by focusing on metrics associated with quality, cost, delivery and the team itself; and by tracking suggestions and processes to identify improvement opportunities.

Real-World Approaches to Continuous Improvement in Shared Services Organizations

More than half of world-class organizations believe continuous improvement/quality programs have the highest optimization effect on achieving goals. But gaining (and retaining) support for such programs can be challenging. A recent virtual roundtable held for members of The Hackett Group’s Finance Shared Services and Purchase-to-Pay Process Advisory Programs brought together executives from Corning, Johnson & Johnson, DuPont, Siemens, Marriott, ABB, Pitney Bowes, Limited Brands and others to talk about ways to implement and sustain continuous improvement/quality programs.

Strategies for Competing in a Flat World: An Interview with Jeff Henley, Chairman, Oracle

Many CFOs are curious as to whether Oracle has actually 'walked the talk' when it comes to globalizing and optimizing its finance operations. This wide-ranging interview with Jeffrey O. Henley, Chairman of the Board, Oracle, by Wayne Mincey, President, The Hackett Group, provides insights into how Oracle is using the latest finance best practices and technologies to deliver sustainable, profitable growth. Topics include the experience, impact and benefits/challenges of globalization of finance processes, complexity reduction, offshoring high-value finance processes, and integrating acquisitions.

Let's Not Say It Out Loud, But Are You Ready for the "R" Word?

Rather than view a possible recession in the US as something that you can only ride out, seize the moment and drive changes in your organization that will quickly reduce operating spend to appropriate levels and free up cash, which can then be invested in projects that will create competitive advantage. The following strategies are critical considerations. Their priority will be determined by individual circumstances, but ultimately, it is profit growth and the corresponding free cash flow that will drive shareholder returns. - Make sure your organization is operating at world-class levels - Remember that in times of uncertainty, cash is king - Make sure your enterprise performance management engine is properly tuned

The Hidden Cost of Alternative Sourcing: 8 Questions Companies Should Be Able to Answer

Even as top-performing companies continue to save millions annually by outsourcing and offshoring portions of their finance shared services, those new to the concept are often disappointed when one or more processes fail to yield expected savings. Unfortunately, these organizations may have failed to consider both the tangible and intangible costs that remain after processes have been moved. Overlooked costs include issues related to retained staff, training, legal and security changes.

Study Confirms that Continuous Improvement Programs Yield Major Cost, Performance Benefits When Applied to SG&A Processes

While continuous improvement programs are focused on steady, incremental change, over the long term they can yield quantum leaps in performance. According to The Hackett Group’s 2007 Study of Continuous Process Improvement Tools, the performance of shared services centers with quality programs stands in stark contrast to that of those without. Findings of the study include: • Metrics-based, highly analytical approaches to improvement, such as Six Sigma and Lean, have overtaken many of the more popular methodologies of recent years. • Shared services executives cite a continuous improvement mentality as a top requirement for successful optimization of activities conducted within the center. • Shared services centers with quality programs have process costs in accounts payable and fixed asset processing that are 38% to 48% lower, respectively, than at companies without such programs. • Executives at companies with improvement programs manage over twice the number of FTEs in time and attendance, leading to lower overall staffing costs.

Diageo Moves Finance Shared Services Further Up the Value Chain

Thanks to the success of its shared services center in Budapest, Hungary, Diageo, the world’s leading premium beverage business, is widely celebrated as a finance shared services exemplar. Beginning in 2002, the Diageo Business Services Center (DBSC) has grown from handling exclusively transactional processes to the incorporation of higher-value finance services, with much of its London-based financial planning and reporting (FPR) activities being migrated to Budapest. This FSS Process Perspective explains how Diageo secured expected benefits from some scale economies; process and service standardization; better relationships with process areas that rely on good analysis; and the freeing up of local finance leaders for more business partnering roles. Diageo’s decision to consolidate FPR signals a trend for shared services pioneers to move higher-value work into a shared services organization.

Transforming and Offshoring Finance Processes: Timing Is Everything

The concept of globalization is extremely compelling for companies striving to achieve world-class performance in finance. But globalization needs to be considered in a much broader context than just taking advantage of labor arbitrage; rather, it represents a chance to evaluate the overall performance of the organization. While globalization should not be a substitute for strategic transformation and continuous improvement, various options exist when it comes to execution, consisting of differences in the timing of the initiatives. However, no company should follow a strict "transform first" or "globalize first" path for all processes; in practice, optimization will take place through a series of "waves" that combine transformation and globalization initiatives. In this report, two different scenarios for a typical Global 1000 company are presented. Although the 10-year NPVs are not far apart in both scenarios, the benefits realization and risk profiles are very different.

Creating Customer Satisfaction Surveys: A Methodology for Effective Measurements

As shared services organizations (SSO) expand the sophistication of their offerings, leaders are looking for opportunities to better support internal customers and identify situations where an outside supplier relationship could improve service. To succeed, however, they need measurement tools that can effectively analyze customer satisfaction. Measuring customer satisfaction reaffirms the organization’s commitment to continuous improvement, while movement toward performance targets encourages client feedback that may alert the organization to opportunities for improvement. A step-by-step approach includes: * Defining your objectives * Defining your questions * Communicating the purpose, timing and significance of the survey * Analyzing and taking action on the results

Diageo Moves Finance Shared Services Further Up the Value Chain

Thanks to the success of its shared services center in Budapest, Hungary, Diageo, the world’s leading premium beverage business, is widely celebrated as a finance shared services exemplar. Since 2002, the Diageo Business Services Center (DBSC) has grown from handling exclusively transactional processes to the incorporation of higher-value finance services, with much of its London-based financial planning and reporting (FPR) activities being migrated to Budapest. This report explains how Diageo secured expected benefits from some scale economies; process and service standardization; better relationships with process areas that rely on good analysis; and the freeing up of local finance leaders for more business partnering roles.

ConAgra Foods: How to Streamline the Close Process and Strengthen Compliance with a Tracking Tool

Once ConAgra, one of North America’s largest packaged-food companies, developed a database tool to track its closing process and eliminate inefficiencies and bottlenecks, the company streamlined its seven-day close process by 25%, putting it within world-class range. ConAgra developed its close tracker with in-house resources and for little capital investment. Many finance organizations seek inexpensive and effective tools, like ConAgra’s close tracker, to help them improve performance in finance processes and capabilities for complying with Sarbanes-Oxley (SOX). As a result of its efforts, ConAgra’s close tracker enables its finance shared services (FSS) team to handle more work, have full visibility into resource requirements and communicate better.

ConAgra Foods: Driving Compliance and Efficiency Via Account Reconciliation Tracking and Peer Review

Achieving Sarbanes-Oxley (SOX) compliance has proven to be both challenging and costly for many finance organizations. To improve its compliance capabilities, ConAgra, one of North America’s largest packaged food companies, developed a database tool to track account reconciliations, and instituted a peer-review process to ensure its reconciliations were of high quality. Not only did these steps streamline SOX-related activities, they delivered additional benefits in terms of increased standardization and improved accuracy in critical finance processes.

Statoil Mends its Roof...While the Sun Shines

At Statoil (one of the world’s largest oil and gas providers), GBS, the company’s shared services organization, includes IT, finance, facilities, HR and procurement. While it ranked in the first-quartile against either efficiency or effectiveness dimensions for each function based on a 2004 Hackett benchmark, it now has less than three years to reach its goal of world class in all functions by 2010. In this FSS Process Perspective, Statoil executive Hakon L. Haugland, describes how GBS is using an improvement agenda dubbed “The Four C’s”(compliance and quality; competence; cost; and common values), clear metrical targets, and value-adding services to win over internal skepticism to unite the energy producer’s far-flung and disparate entities.

One Project at a Time: How One Hotelier’s Business Services Center Brought Shared Services to 2,800 Properties

Since its opening in 2000, the shared services center of a multi-national hotel chain, named here Hotel Business Services (HBS), has grown the size and scope of its operation through a series of dedicated projects. Throughout its expansion, which included the successful deployment of the shared services solution to 180 full-services hotels in North America, HBS leadership paid close attention to building a high-performing, customer-focused organization. To that end, HBS established on-going advisory team meetings and developed comprehensive customer-survey mechanisms. Moreover, from day one of launching HBS, it has been understood by the entire company that shared services is a major change effort and that change management principles should be followed.

Creating an “Execution Culture” in Shared Services: Enabling and Sustaining Continuous Improvement

Although transformational efforts can deliver significant benefits to organizations, they often provide only marginal benefits and sometimes fail completely. Full or partial failure by a company in its effort to change is usually the result of an earlier failure to instill a culture that supports the transformational program. Leaders of shared services and the companies they service can benefit by inculcating an execution culture within their organization. Developing such a culture requires three phases, each composed of discrete sub-steps: • Create a climate for change • Engage and enable the entire organization • Implement and sustain change An execution culture should be nurtured, protected and developed as a core organizational capability. As such, its precepts will be routinely applied to all transformational programs.

Shared Services: Sometimes the Best Choice Is Not Having a Choice

Mandating shared services provides greater cost benefits and leads to superior performance against service and quality dimensions. This Process Perspective compares the business impact on companies that mandate use of shared services and those that do not. Additional insight is provided from Les Mara, head of Business Process Outsourcing EMEA at Hewlett-Packard, which has obtained dramatic improvements from its shift to a mandated model.

Harmonization, Centralization and Innovation Are Driving the Philips Finance Shared Services Organization toward Its World-Class Goal

This Hackett Perspective is based on a presentation by Royal Philips Electronics Senior Vice President Michel E. de Zeeuw, at The Hackett Group's Second Annual European Best Practices Conference in Cannes, France, June 1-2, 2006. Philips' finance SSO has a goal to become world-class by the end of 2006. According to Hackett, world-class organizations share certain characteristics, such as focusing on customer service improvement and cost reduction, relentlessly deploying process tools and techniques that standardize, centralize and automate, and rejecting a "headquarter" mindset in favor of a customer-partnering mentality. This Perspective shows within Philips' finance SSO the drive toward world-class status demonstrates adherence to these characteristics.

Finance Shared Services Organizations in Europe: Seeking New Horizons

The Hackett Group recently finished analyzing the results of its fifth annual survey of finance shared services in Europe. One of the chief findings is that companies are making major changes in delivery models. They are utilizing the options provided by globalization, with most beginning to locate more activities in larger centers covering multiple geographies, with fewer centers remaining local or national. Today, nearly 80% of shared services organizations (SSOs) use a regional or global shared service model designed to support multiple countries. Further, outsourcing is affecting all of these variants. While SSO process outsourcing is low today, a significant proportion of companies are considering outsourcing some or most of their SSO processes and transactions in the near-medium term future. The survey of over 100 leaders of finance shared services also finds that European SSOs: - Are fulfilling expectations - Are expanding their value by venturing into non-transactional processes - Are increasingly well-managed

The People Problem: Unlocking the Barriers to Successful Transformation Programs

While transformation programs can deliver substantial cost benefits to finance organizations, their potential is diminished when leaders underestimate just how much work is required to manage the people component of change. Effective finance leaders understand that effectiveness gains are within reach when they follow these practices: • Make people the priority • Develop change leadership • Develop the business case with strategic and tangible benefits • Communicate the vision • Engage senior leadership • Engage the business units • Focus the organization • Resource properly • Master project management

The Case for Europe: Why the Continent Will Always Be Home to (Some) Finance Shared Services Centers

Most European countries today house shared services centers, but over the past 20 years several “clusters” of countries have, at different times, dominated the shared services landscape. Starting with the British Isles in the 1980s, through to Eastern Europe today, these nation groups have offered labor arbitrage and other incentives to woo the shared services Euro. But popularity has proven a burden as well as a blessing. Rising numbers of centers led to overheating, and rising labor and property costs. Sequentially, this diluted the appeal of each group, or wave, of countries, opening the field for cheaper and more capacious destinations. In this FSS Perspective, we explain that the European shared services migration has probably come to an end and that the potential from moving further east to Russia and Ukraine is unlikely, as there is little benefit to be gained in those countries.Although Asia will offer stiff competition, some European locations will take a bigger share of global processes.

How Balanced Scorecards Work for Statoil on Three Levels

When Norway’s Statoil launched its business support unit, Global Business Services (GBS), in 2001, it quickly created and implemented a cascade of balanced scorecards for three levels: 1. GBS 2. Functional shared services lines (such as finance) 3. Departmental levels Scorecards at each level contain five perspectives shared throughout the enterprise. Led by Rune Skjaeveland, vice president of strategy, finance and control, GBS is working toward becoming a world-class provider of business services by 2010. To that end, the company also ties the balanced scorecard to individual performance, including bonuses.

Four Steps to Creating a Balanced Scorecard for the Finance Shared Services Center

Despite compelling evidence of the value of a balanced scorecard management system, many users experience dissatisfaction when their organizations view it as a measurement system rather than a broader management framework. A balanced scorecard management system is comprised of: 1. Strategic objectives 2. Strategic initiatives 3. Metrics and targets Although the system can be used at any organizational level, it should be designed for a finance shared service center (SSC) by following these four steps in order: 1. Creating a vision of success 2. Choosing strategic measures 3. Identifying performance targets 4. Identifying strategic initiatives

Shared Services: Sometimes the Best Choice is not Having a Choice

Mandating shared services provides greater cost benefits and leads to superior performance against service and quality dimensions. This Process Perspective compares the business impact on companies that mandate use of shared services and those that do not. Additional insight is provided from from Les Mara, head of Business Process Outsourcing EMEA at Hewlett-Packard, which has obtained dramatic improvements from its shift to a mandated model.

Rolls-Royce Proves that Finance SSCs Do More than Cut Costs: UK firm cuts costs by 56%; customer satisfaction soars

As a catalyst for change, few events rival those of September 11, 2001 and companies serving the aerospace industry were particularly hard hit. As the finance function of UK-based Rolls-Royce Plc set about the task of helping the enterprise overcome the aftermath by reshaping finance service delivery capabilities, it also had to address an internal challenge that was hampering the performance of the finance organization itself. Specifically, as a result of changes to the business structure, the company’s finance function had become overly complex. The senior finance team recognized a requirement for a wide-ranging finance transformation program to improve both the efficiency and effectiveness of the function. Creating a shared services center would be central to this transformation effort. Rolls-Royce looked internally to project manager Geoff Lewins, to lead the implementation and operation of its UK Finance Service Center near the firm’s global headquarters in Derbyshire, England. As this Hackett Perspective explains, the original decision to launch a shared services organization was predicated on the attainment of significant cost reductions. In easily achieving and surpassing the cost targets, Rolls-Royce found other benefits of its shared services implementation - in particular, the finance shared services organization now enjoys significantly improved levels of customer satisfaction. Unwilling to rest on its laurels, Rolls-Royce used a Hackett benchmarking program to guide further improvements within shared services and, more broadly, the finance organization. This case study is based on a presentation by Geoff Lewins, at The Hackett Group’s 2006 European Best Practices Conference.

Hackett Research Finds that World-Class IT Is a Key Enabler of World-Class Finance

Research from The Hackett Group shows a direct correlation between world-class finance and world-class IT. Specifically, world-class finance organizations use technology more aggressively to improve efficiency in transaction processing and generate greater effectiveness in value-adding activities. In fact, the 45% cost advantage enjoyed by world-class finance groups is largely attributable to a superior use of technology. Consequently, finance should be developing strong partnering relationships with IT. If not, the performance of finance could be limited. Interestingly, Hackett research also shows that world-class IT organizations spend 7% more on IT than those in the peer group. Among the four major functions The Hackett Group benchmarks, world-class IT operations are operationally more expensive than their peers. Why? Because the cost payback from a higher spend by IT is realized in other functions. Recent Hackett analysis for the Book of Numbers 2006 Metrics: The 5 Best Practices of World-Class Companies clearly demonstrates how world-class IT is a precursor for world-class performance in other functions, including finance. Best practices used by IT organizations to generate world-class performance include architecture and application standardization and clear governance models for alignment to the business. These organizations also employ outsourcing more effectively and place their CIOs on executive committees. Collectively, these best practices generate greater business value in finance as well as in other functional areas. This Hackett Book of Numbers Insight will examine the connection between world-class IT and world-class finance companies. Specifically, we will focus on the effects of technology in finance, the cost reduction and value creation opportunities, and ways companies can foster closer working relationships between IT and finance in their own organizations.

How Reducing Complexity Through a 'Keep It Simple' Transformation Program Is Securing Cost and Compliance Benefits for a Global Tech Company

Process simplification and standardization are core strategies for building efficiencies in support functions, according to The Hackett Group's research. In addition to measurable cost savings, these twin interventions for complexity reduction are proving equally powerful enablers of process transparency and control critical for survival in the Sarbanes-Oxley (SOX) era. This Hackett Perspective describes how one international technology company, which we will call PAT Co. for the purposes of this case study, is working to secure cost and compliance benefits by reducing needless business and technological complexity. We explain why the organization purposefully chose to keep the program simple in order to secure acceptance enterprise-wide and the role that a Hackett benchmark played in further ensuring buy-in among a metric-savvy population.

Making the Case for Implementing End-to-End Process Ownership in Finance Shared Services

This Hackett Perspective describes the benefits of end-to-end process management within a finance shared services environment and how to avoid the pitfalls of doing so, which are related to such issues as cultural challenges, lack of executive sponsorship and lack of technology standardization. Also explained is the critical role of and hiring requirements for a global end-to-end process owner.

Nearly Half of CFOs Entrust Contract Management to Sales, Despite Proof that Better Choices Exist

Contract management practices impact both the sell side and the buy side of virtually every company's operations. On the sell side, effective practices can improve a company's relationships with customers by assuring that its commitments and obligations to customers are being met accurately and in a timely manner. Adherence to contracts' terms and conditions is a critical component of risk management; effective contract management practices can mitigate the associated impact, for example, of payment disputes or compliance issues. On the buy side, intelligent contract management approaches ensure, among other things, that companies are being billed properly by their suppliers and that suppliers are being paid only in accordance with negotiated terms; that payments are made in a manner that optimizes discount opportunities; and that, when necessary or appropriate, contracts are being reassessed or re-bid. As discussed in this report, leading companies have invested in contract management practices (organizational, process, technology) that have a positive impact on effectiveness, while reducing risk and enhancing financial performance.

2005 Performance Metrics and Practices of World-Class Human Resources Organizations

Top-of-mind issues among HR leaders - such as managing costs, minimizing risk, capitalizing on the promise of Web technologies, and making appropriate business process sourcing decisions - are all examined in detail in this research. The nearly 70 charts in this volume represent data selected from hundreds of different performance metrics and best practices in use at client organizations worldwide, and demonstrate the most significant differentiators between specific world-class performers (as identified by our empirically based methodology) and their more typical peers.

Process Alignment of Major Corporate Activities

As companies look to both create and expand their shared services operations, the inevitable debate takes place regarding what processes belong in shared services vs. remaining in other parts of the organisation. While there are numerous factors, both internal and external, that can impact that type of decision, the fact is that shared services can be a viable location for many processes that may not have even been considered as candidates in the past. This analysis addresses these issues and contains a graphical presentation of the organisational and functional alignment of 87 processes that could be aligned with shared services.